(266243-D) Unaudited Condensed Interim Financial Statements For the six months period ended 30 June 2016
CONTENTS PAGE Unaudited Condensed Interim Statement of Financial Position 1 Unaudited Condensed Interim Income Statement 2 Unaudited Condensed Interim Statement of Comprehensive Income 3 Unaudited Condensed Interim Statement of Changes in Equity 4 Unaudited Condensed Interim Statement of Cash Flows 5-6 Notes to the Unaudited Condensed Interim Financial Statements 7-28
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 Note Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund Company fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 ASSETS Property, plant and equipment 1,047 - - 1,047 816 - - 816 Intangible assets 5,102 - - 5,102 5,381 - - 5,381 Investments 11 2,319,342 1,577,128 9,072,087 12,945,899 2,036,420 1,596,575 8,716,748 12,327,627 Financing receivables 18,495 - - 18,495 19,924-3,300 23,224 Retakaful assets 12-194,651 44,222 238,873-200,860 36,129 236,989 Takaful receivables - 79,090 130,020 209,110-85,479 89,732 175,211 Other receivables 105,868 50,590 105,175 189,465 246,215 17,372 90,809 149,889 Deferred tax assets 2,927 - - - 12,719 5,835 5,274 23,828 Qard receivable 36,684 - - - 36,684 - - - Current tax assets 13,558 4,696 22,776 41,030 4,396 3,883 20,335 28,614 Cash and bank balances 20,404 114,004 88,830 223,238 14,326 51,037 61,178 126,541 Total assets 2,523,427 2,020,159 9,463,110 13,872,259 2,376,881 1,961,041 9,023,505 13,098,120 EQUITY, LIABILITIES AND PARTICIPANTS' FUNDS Equity Share capital 400,000 - - 400,000 400,000 - - 400,000 Reserves 1,205,897 - - 1,204,239 1,133,721 - - 1,132,605 Total equity 1,605,897 - - 1,604,239 1,533,721 - - 1,532,605 Liabilities and Participants' Funds Participants' funds 13-148,364 2,733,348 2,881,712-116,893 2,521,759 2,638,652 Takaful certificate liabilities 14-1,551,428 6,298,900 7,829,328-1,505,903 6,135,081 7,619,984 Qard payable - - 36,684 - - - 36,684 - Subordinated obligation 300,000 - - 300,000 300,000 - - 300,000 Expense liabilities 519,820 - - 519,820 470,531 - - 470,531 Deferred tax liabilities - 151 5,745 2,969 - - - - Takaful payables 5,837 39,618 56,566 102,021 6,034 41,729 38,854 86,617 Other payables 90,734 280,598 331,867 631,031 65,406 296,516 291,127 448,542 Profit payable on subordinated obligation 1,139 - - 1,139 1,189 - - 1,189 Total liabilities and 917,530 2,020,159 9,463,110 12,268,020 843,160 1,961,041 9,023,505 11,565,515 participants' funds Total equity, liabilities and participants' funds 2,523,427 2,020,159 9,463,110 13,872,259 2,376,881 1,961,041 9,023,505 13,098,120 These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the financial year ended 31 December 2015 and the accompanying explanatory notes attached to the unaudited condensed Interim financial statements. 1
UNAUDITED CONDENSED INTERIM INCOME STATEMENT FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 6 months period ended 6 months period ended 30.06.2015 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund Company fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Operating revenue 356,678 634,949 811,210 1,492,967 309,556 581,107 821,645 1,442,317 Gross earned contributions - 592,288 618,578 1,210,817-521,137 642,789 1,163,819 Earned contributions ceded to retakaful - (42,571) (26,255) (68,826) - (52,081) (14,705) (66,786) Net earned contributions - 549,717 592,323 1,141,991-469,056 628,084 1,097,033 Fee and commission income 309,821 7,785 89 7,874 269,884 6,206 412 6,618 Investment income 46,857 34,837 192,632 274,326 39,672 29,687 178,856 248,215 Net realised gains 5,088 8,025 32,326 45,439 8,333 5,651 45,710 59,694 Net fair value (losses)/gains - (369) 105,809 105,440-635 46,502 47,137 Other operating expenses (844) (1,101) (8,632) (10,577) (11,803) (3,308) (85,136) (100,247) Other revenue 360,922 49,177 322,224 422,502 306,086 38,871 186,344 261,417 Gross benefits and claims paid - (297,786) (396,002) (693,788) - (281,447) (313,805) (595,252) Claims ceded to retakaful - 14,465 10,472 24,937-55,746 16,743 72,489 Gross change to certificate liabilities - (37,701) (159,504) (463,005) - (88,164) (247,279) (471,933) Change in certificate liabilities ceded to retakaful - (13,404) 8,093 (5,311) - 15,968 8,231 24,199 Net benefits and claims - (334,426) (536,941) (1,137,167) - (297,897) (536,110) (970,497) Management expenses (137,188) (497) (12,391) (150,027) (131,753) (382) (17,100) (149,128) Change in expense liabilities (49,289) - - (49,289) (28,308) - - (28,308) Fee and commission expenses (110,649) (177,116) (135,312) (113,256) (112,505) (131,454) (145,040) (119,115) Profit on subordinated obligation (6,712) - - (6,712) (6,724) - - (6,724) Tax borne by participants - 1,925 (13,798) (11,873) - (6,556) (16,140) (22,696) Other expenses (303,838) (175,688) (161,501) (331,157) (279,290) (138,392) (178,280) (325,971) Operating profit before surplus transfers 57,084 88,780 216,105 96,169 26,796 71,638 100,038 61,982 Surplus transferred to participants' funds - (49,695) (216,105) - - (36,452) (100,038) - Surplus attributable to shareholders 39,085 (39,085) - - 35,186 (35,186) - - Profit/surplus before taxation 96,169 - - 96,169 61,982 - - 61,982 Taxation (44,479) - - (44,479) (28,239) - - (28,239) Zakat (3,603) - - (3,603) (6,308) - - (6,308) Net profit for the period 48,087 - - 48,087 27,435 - - 27,435 Basic earnings per share (sen) 12.02 - - 12.02 6.86 - - 6.86 These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the financial year ended 31 December 2015 and the accompanying explanatory notes attached to the unaudited condensed Interim financial statements. 2
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 6 months period ended 6 months period ended 30.06.2015 Shareholder's General Family Shareholder's General Family fund takaful fund takaful fund Company fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 Net profit for the period 48,087 - - 48,087 27,435 - - 27,435 Other comprehensive income: Item that may be subsequently reclassified to income statement Net gains/(losses) on Available-for-sale ("AFS") financial assets: Gains on fair value changes 37,285 35,984 23,987 96,714 24,120 17,665 21,830 62,868 Realised gains transferred to income statement (5,088) (8,025) (23,965) (37,078) (8,333) (5,651) (33,566) (47,550) Tax effects relating to components of other comprehensive income (8,108) (7,098) 258 (14,948) (3,947) (3,003) 1,291 (5,659) Other comprehensive (loss)/income attributable to participants - (20,861) (280) (21,141) - (9,011) 10,445 1,434 Other comprehensive income for the period, net of tax 24,089 - - 23,547 11,840 - - 11,093 Total comprehensive income for the period 72,176 - - 71,634 39,275 - - 38,528 These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the financial year ended 31 December 2015 and the accompanying explanatory notes attached to the unaudited condensed Interim financial statements. 3
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 Attributable to Equity Holder of the Company Non-Distributable Distributable Share Capital Available-for-sale Reserve Retained Profits Total Equity RM'000 RM'000 RM'000 RM'000 At 1 January 2016 400,000 (29,676) 1,162,281 1,532,605 Net profit after tax for the period - - 48,087 48,087 Other comprehensive income for the period - 23,547-23,547 Total comprehensive income for the period - 23,547 48,087 71,634 At 30 June 2016 400,000 (6,129) 1,210,368 1,604,239 At 1 January 2015 400,000 (30,854) 1,019,961 1,389,107 Net profit after tax for the period - - 27,435 27,435 Other comprehensive income for the period - 11,093-11,093 Total comprehensive income for the period - 11,093 27,435 38,528 At 30 June 2015 400,000 (19,761) 1,047,396 1,427,635 These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the financial year ended 31 December 2015 and the accompanying explanatory notes attached to the unaudited condensed Interim financial statements. 4
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 6 months period ended 6 months period ended 30.06.2015 RM'000 RM'000 CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation and zakat 96,169 61,982 Adjustments for: Depreciation of property,plant and equipment 220 284 Amortisation of intangible assets 352 1,226 Fair value gains on investments (105,440) (47,137) Realised gains on disposal of investments (45,439) (59,693) Unrealised losses on foreign exchange - 1 Realised gains on foreign exchange - (45) Write off of takaful receivables 172 - Allowance for/(reversal of) impairment losses on: Investments 10,101 98,207 Takaful receivables 638 2,037 Other receivables (70) (512) Financing receivables - (17) Retakaful assets 61 144 Profit income (274,849) (228,687) Profit on subordinated obligation 6,712 6,724 Gross dividend income (10,505) (25,443) Net amortisation of premiums 10,143 5,665 Increase in net contribution liabilities 568 41,856 Surplus transferred from general takaful fund 49,695 36,452 Surplus transferred from family takaful fund 216,105 100,038 Operating cash flows before working capital changes (45,367) (6,918) Changes in working capital: Proceeds from sale of investments 3,787,886 4,347,063 Purchase of investments (4,196,623) (4,320,526) Increase in takaful receivables (34,710) (38,386) (Increase)/decrease in other receivables (28,209) 272,031 Increase/(decrease) in other payables 192,169 (96,390) Increase in expense liabilities 49,289 28,308 Increase/(decrease) in takaful payables 15,404 (26,289) Decrease in financing receivables 4,729 2,243 Increase in placements of deposits with financial institutions (19,269) (587,291) Decrease/(increase) in retakaful assets 5,312 (24,199) Increase in takaful certificate liabilities 201,517 331,824 Operating cash flows after working capital changes (67,872) (118,530) 5
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS (CONT'D.) FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 6 months 6 months period ended period ended 30.06.2015 RM'000 RM'000 CASH FLOW FROM OPERATING ACTIVITIES (CONT'D.) Profit income received 262,593 229,048 Gross dividend income received 11,473 28,346 Zakat paid (7,594) (801) Taxation paid (56,917) (48,750) Mudharabah paid to participants (37,700) (32,900) Net cash flows generated from operating activities 103,983 56,413 CASH FLOWS FROM FINANCING ACTIVITIES Profit paid for subordinated obligation (6,762) (6,761) Net cash flows used in financing activities (6,762) (6,761) CASH FLOW FROM INVESTING ACTIVITIES Purchase of intangible assets (73) (191) Purchase of property, plant and equipment (451) (102) Net cash flows used in investing activities (524) (293) Net increase in cash and cash equivalents 96,697 49,359 Cash and cash equivalents at beginning of period 126,541 120,576 Cash and cash equivalents at end of period 223,238 169,935 Cash and cash equivalents comprise: Cash and bank balances of: Shareholder's fund 20,404 21,700 General takaful fund 114,004 85,233 Family takaful fund 88,830 63,002 223,238 169,935 These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for the financial year ended 31 December 2015 and the accompanying explanatory notes attached to the unaudited condensed Interim financial statements. 6
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 1. BASIS OF PREPARATION The unaudited condensed interim financial statements of the Company for the period ended 30 June 2016 have been prepared in accordance with Malaysian Financial Reporting Standard ( MFRS ) 134 - Interim Financial Reporting as issued by the Malaysian Accounting Standards Board ("MASB") and International Accounting Standard ("IAS") 34 - Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"), Guidelines/Circulars issued by Bank Negara Malaysia and Islamic Financial Services Act 2013. In accordance with the Islamic Financial Services Act 2013, the assets and liabilities of the takaful funds are segregated from those of the takaful operator: a concept known as segregation of funds. However, in compliance with MFRS 10 Consolidated Financial Statements, the assets, liabilities, income and expenses of the takaful funds are consolidated with those of the takaful operator to represent the control possessed by the operator over the respective funds. The unaudited condensed interim financial statements of the Company have been prepared under the historical cost basis except for certain financial assets and financial liabilities that are stated at fair value. The Company has met the minimum capital requirements as prescribed by Risk-Based Capital Takaful Framework for takaful operators ("the RBCT Framework") issued by Bank Negara Malaysia as at the reporting date. The unaudited condensed interim financial statements do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the audited financial statements of the Company for the financial year ended 31 December 2015. The explanatory notes attached to the unaudited condensed interim financial statements provide an explanation of events and transactions that are significant to gain an understanding of the changes in the financial position and performance of the Company since the year ended 31 December 2015. The unaudited condensed interim financial statements are presented in Ringgit Malaysia ("RM") and rounded to the nearest thousand (RM'000) unless otherwise stated. 7
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 (CONT'D) 2. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the unaudited condensed interim financial statements are consistent with those adopted in the audited financial statements for the year ended 31 December 2015 except for the following MFRSs, Amendments to MFRSs and Annual improvements which effective for annual periods beginning on or after 1 January 2016: MFRS 10 Consolidated Financial Statements - Investment Entities: Applying the Consolidation Exception (Amendments to MFRS 10) MFRS 11 Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations (Amendments to MFRS 11) MFRS 12 Disclosure of Interests in Other Entities - Investment Entities: Applying the Consolidation Exception (Amendments to MFRS 12) MFRS 14 Regulatory Deferral Accounts MFRS 101 Presentation of Financial Statements - Disclosure Initiative (Amendments to MFRS 101) MFRS 116 Property, Plant and Equipment - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to MFRS 116) MFRS 127 Separate Financial Statements - Equity Method in Separate Financial Statements (Amendments to MFRS 127) MFRS 128 Investment in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to MFRS 128) MFRS 128 Investments in Associates and Joint Ventures - Investment Entities: ' Applying the Consolidation Exception (Amendments to MFRS 128) MFRS 138 Intangible Assets - Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to MFRS 138) Annual Improvements to MFRSs 2012-2014 Cycle The Company does not expect that the adoption of the above MFRSs and amendments on the annual improvements will have significant financial implications in the unaudited condensed interim financial statements. 3. STATUS OF AUDIT QUALIFICATION The auditor's report on the audited financial statements of the financial year ended 31 December 2015 did not contain any qualification. 8
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2016 (CONT'D) 4. SEASONALITY OR CYCLICALITY OF OPERATIONS The operations of the Company was not materially affected by any seasonal or cyclical factors during the interim financial period ended 30 June 2016. However, as is common for other licensed takaful operators, surplus of the family takaful fund will only be transferred at the financial year end upon approval by the Appointed Actuary. 5. UNUSUAL ITEMS There were no unusual items affecting assets, liabilities, equity, net income or cash flows for the interim financial period ended 30 June 2016. 6. CHANGES IN ESTIMATES There were no changes in the basis used for accounting estimates for the current interim financial period. 7. ISSUES, REPURCHASES AND REPAYMENT OF DEBT AND EQUITY SECURITIES There were no issuance or repayment of debt and equity securities for the interim financial period ended 30 June 2016. 8. DIVIDENDS PAID No dividend has been paid or declared by the Company from the previous audited financial statements. 9. MATERIAL EVENTS SUBSEQUENT TO END OF REPORTING PERIOD There were no material events subsequent to the end of the period reported that require disclosure or adjustments to the unaudited condensed interim financial statements. 10. CHANGES IN THE COMPOSITION OF THE COMPANY There were no change in the composition of the Company during the interim financial period. 9
11. INVESTMENTS Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 Malaysian government papers 107,761 378,424 347,120 833,305 Debt securities 1,802,275 865,940 7,132,141 9,800,356 Equity securities 58,406 9,109 632,306 699,821 Unit and property trust funds 4,040 308 41,819 46,167 Investment-linked units 22,658 - - - Structured products - - 25,223 25,223 Negotiable Islamic certificates of deposit ("NICD") - - 121,526 121,526 Deposits with financial institutions 324,202 323,347 771,952 1,419,501 2,319,342 1,577,128 9,072,087 12,945,899 Malaysian government papers 117,241 518,895 404,672 1,040,808 Debt securities 1,552,619 930,258 5,865,174 8,348,051 Equity securities 108,538 17,921 1,140,946 1,267,405 Unit and property trust funds 3,740 331 61,352 65,423 Investment-linked units 22,116 - - - Structured products - 19,128 48,311 67,439 Negotiable Islamic certificates of deposit ("NICD") - 9,848 128,419 138,267 Deposits with financial institutions 232,166 100,194 1,067,874 1,400,234 2,036,420 1,596,575 8,716,748 12,327,627 10
11. INVESTMENTS (CONT'D) Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 Available-for-sale ("AFS") 1,995,140 1,253,781 2,659,539 5,885,802 Fair value through profit and loss ("FVTPL"): - Designated upon initial recognition - - 5,616,439 5,616,439 - Held for trading ("HFT") - - 24,157 24,157 Loans and receivables ("LAR") 324,202 323,347 771,952 1,419,501 2,319,342 1,577,128 9,072,087 12,945,899 Available-for-sale ("AFS") 1,804,254 1,498,879 3,015,738 6,296,755 Fair value through profit and loss ("FVTPL"): - Designated upon initial recognition - - 4,610,079 4,610,079 - Held for trading ("HFT") - (2,498) 23,057 20,559 Loans and receivables ("LAR") 232,166 100,194 1,067,874 1,400,234 2,036,420 1,596,575 8,716,748 12,327,627 The following investments will mature after 12 months: Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 AFS 1,910,035 1,228,963 1,982,679 5,121,677 FVTPL - Designated upon initial recognition - - 5,527,324 5,527,324 - HFT - - 15,522 15,522 1,910,035 1,228,963 7,525,525 10,664,523 AFS 1,666,975 1,450,734 1,761,635 4,879,344 FVTPL - Designated upon initial recognition - - 4,428,747 4,428,747 - HFT - - 14,609 14,609 1,666,975 1,450,734 6,204,991 9,322,700 11
11. INVESTMENTS (CONT'D) (i) AFS Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 At fair value: Malaysian government papers 107,761 378,424 116,154 602,339 Unquoted debt securities in Malaysia 1,802,275 865,940 1,859,196 4,527,411 Quoted equity securities in Malaysia 58,406 9,109 623,813 691,328 Quoted unit and property trust funds in Malaysia 4,040 308 41,677 46,025 Investment-linked units 22,658 - - - Structured products - - - - NICD - - 18,699 18,699 1,995,140 1,253,781 2,659,539 5,885,802 At fair value: Malaysian government papers 117,241 518,895 155,779 791,915 Unquoted debt securities in Malaysia 1,552,619 930,258 1,647,865 4,130,742 Quoted equity securities in Malaysia 108,538 17,921 1,132,572 1,259,031 Quoted unit and property trust funds in Malaysia 3,740 331 61,278 65,349 Investment-linked units 22,116 - - - Structured products - 21,626-21,626 NICD - 9,848 18,244 28,092 1,804,254 1,498,879 3,015,738 6,296,755 12
11. INVESTMENTS (CONT'D) (ii) FVTPL - Designated upon initial recognition Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 At fair value: Malaysian government papers - - 226,503 226,503 Unquoted debt securities in Malaysia - - 5,261,886 5,261,886 Structured products - - 25,223 25,223 NICD - - 102,827 102,827 - - 5,616,439 5,616,439 At fair value: Malaysian government papers - - 244,701 244,701 Unquoted debt securities in Malaysia - - 4,206,892 4,206,892 Structured products - - 48,311 48,311 NICD - - 110,175 110,175 - - 4,610,079 4,610,079 - HFT At fair value: Malaysian government papers - - 4,463 4,463 Unquoted debt securities in Malaysia - - 11,059 11,059 Quoted equity securities in Malaysia - - 8,493 8,493 Quoted unit and property trust funds outside Malaysia - - 142 142 - - 24,157 24,157 13
11. INVESTMENTS (CONT'D) (ii) FVTPL Shareholder's General Family fund takaful fund takaful fund Company RM'000 RM'000 RM'000 RM'000 - HFT At fair value: Malaysian government papers - - 4,192 4,192 Unquoted debt securities in Malaysia - - 10,417 10,417 Quoted equity securities in Malaysia - - 8,374 8,374 Quoted unit and property trust funds outside Malaysia - - 74 74 Structured products - (2,498) - (2,498) - (2,498) 23,057 20,559 (iii) LAR Deposits and placements with financial institutions Islamic investment accounts with: Licensed financial institutions 185,047 209,369 378,298 772,714 Others 139,155 113,978 393,654 646,787 324,202 323,347 771,952 1,419,501 Deposits and placements with financial institutions Islamic investment accounts with: Licensed financial institutions 187,022 85,194 797,589 1,069,805 Others 45,144 15,000 270,285 330,429 232,166 100,194 1,067,874 1,400,234 The carrying amounts of LAR are reasonable approximations of fair values due to the short term maturity of the financial assets. Included in the LAR are assets pledged to obtain an Islamic bank guarantee facilities with Maybank Islamic Berhad which amounted to RM3,000,000 (: RM3,000,000). An analysis of the different fair value measurement bases used in the determination of the fair values of investments are further disclosed in Note 17. 14
12. RETAKAFUL ASSETS RM'000 RM'000 Retakaful operators' share of: General takaful certificate liabilities (Note 14) 197,252 203,400 Family takaful certificate liabilities (Note 14) 44,222 36,129 Allowance for impairment losses in relation to general takaful certificate liabilities (2,601) (2,540) 238,873 236,989 13. PARTICIPANTS' FUND Takaful funds and Company RM'000 RM'000 General takaful fund (Note (a)) 148,364 116,893 Family takaful fund (Note (b)) 2,733,348 2,521,759 2,881,712 2,638,652 (a) General takaful fund RM'000 RM'000 Accumulated surplus (Note (i)) 156,612 146,002 AFS reserves (Note (ii)) (8,248) (29,109) 148,364 116,893 (i) Accumulated surplus RM'000 RM'000 At 1 January 2016/2015 146,002 202,806 Surplus arising during the period/year 49,695 95,380 Hibah paid to participants during the period/year (39,085) (152,184) At 30 June 2016/31 December 2015 156,612 146,002 15
13. PARTICIPANTS' FUND (CONT'D.) (ii) AFS reserves RM'000 RM'000 At 1 January 2016/2015 (29,109) (21,106) Net gain on fair value changes 35,984 (4,875) Realised gain transferred to income statement (8,025) (5,796) Deferred tax on fair value changes (7,098) 2,668 At 30 June 2016/31 December 2015 (8,248) (29,109) (b) Family takaful fund RM'000 RM'000 Accumulated surplus (Note (i)) 2,662,621 2,451,312 Surplus attributable to participants (Note (ii)) 49,738 49,738 AFS reserves (Note (iii)) 20,989 20,709 2,733,348 2,521,759 (i) Accumulated surplus RM'000 RM'000 At 1 January 2016/2015 2,451,312 2,270,764 Surplus arising during the period/year 216,105 251,798 Surplus attributable to participants during the period/year - (20,034) Hibah paid to participants during the period/year (4,796) (51,216) At 30 June 2016/31 December 2015 2,662,621 2,451,312 (ii) Surplus attributable to participants RM'000 RM'000 At 1 January 2016/2015 49,738 29,704 Surplus attributable to participants during the period/year - 20,034 At 30 June 2016/31 December 2015 49,738 49,738 16
13. PARTICIPANTS' FUND (CONT'D.) (iii) AFS reserves RM'000 RM'000 At 1 January 2016/2015 20,709 (33,518) Net gain on fair value changes 23,987 105,453 Realised gain transferred to income statement (23,965) (47,084) Deferred tax on fair value changes 258 (4,142) At 30 June 2016/31 December 2015 20,989 20,709 14. TAKAFUL CERTIFICATE LIABILITIES Takaful funds Gross Retakaful Net RM'000 RM'000 RM'000 General takaful fund (Note (a)) 1,551,428 (197,252) 1,354,176 Family takaful fund (Note (b)) 6,298,900 (44,222) 6,254,678 7,850,328 (241,474) 7,608,854 Less: Seed money elimination (21,000) - (21,000) 7,829,328 (241,474) 7,587,854 General takaful fund (Note (a)) 1,505,903 (203,400) 1,302,503 Family takaful fund (Note (b)) 6,135,081 (36,129) 6,098,952 7,640,984 (239,529) 7,401,455 Less: Seed money elimination (21,000) - (21,000) 7,619,984 (239,529) 7,380,455 (a) General takaful fund Gross Retakaful Net RM'000 RM'000 RM'000 Claims liabilities (Note (i)) 963,636 (172,175) 791,461 Contribution liabilities (Note (ii)) 587,792 (25,077) 562,715 1,551,428 (197,252) 1,354,176 Claims liabilities (Note (i)) 925,935 (185,579) 740,356 Contribution liabilities (Note (ii)) 579,968 (17,821) 562,147 1,505,903 (203,400) 1,302,503 17
14. TAKAFUL CERTIFICATE LIABILITIES (CONT'D.) (a) General takaful fund (cont'd.) (i) Claims liabilities Gross Retakaful Net RM'000 RM'000 RM'000 At 1 January 2016 925,935 (185,579) 740,356 Claims incurred in the current accident period 345,517 (13,843) 331,674 Movement in claims incurred in prior accident period (17,103) 9,582 (7,521) Claims paid during the period (297,786) 14,465 (283,321) Movements in PRAD 7,073 3,200 10,273 At 30 June 2016 963,636 (172,175) 791,461 At 1 January 2015 811,854 (225,947) 585,907 Claims incurred in the current accident year 653,152 (30,068) 623,084 Movement in claims incurred in prior accident years 30,703 (30,996) (293) Claims paid during the year (587,445) 93,867 (493,578) Movements in PRAD 17,671 7,565 25,236 At 31 December 2015 925,935 (185,579) 740,356 (ii) Contribution liabilities Gross Retakaful Net RM'000 RM'000 RM'000 At 1 January 2016 579,968 (17,821) 562,147 Contributions written during the period 600,112 (49,827) 550,285 Contributions earned during the period (592,288) 42,571 (549,717) At 30 June 2016 587,792 (25,077) 562,715 18
14. TAKAFUL CERTIFICATE LIABILITIES (CONT'D.) (a) General takaful fund (cont'd.) (ii) Contribution liabilities (cont'd) Gross Retakaful Net RM'000 RM'000 RM'000 At 1 January 2015 583,866 (31,494) 552,372 Contributions written during the year 1,108,653 (83,362) 1,025,291 Contributions earned during the year (1,112,551) 97,035 (1,015,516) At 31 December 2015 579,968 (17,821) 562,147 (b) Family takaful fund (i) The family takaful certificate liabilities and its movements are further analysed as follows: Gross Retakaful Net RM'000 RM'000 RM'000 Claims liabilities (Note (ii)) 129,741 (10,090) 119,651 Actuarial liabilities (Note (ii)) 6,140,646 (34,132) 6,106,514 NAV attributable to unitholders (Note (ii)) 28,513-28,513 6,298,900 (44,222) 6,254,678 Claims liabilities (Note (ii)) 121,506 (9,888) 111,618 Actuarial liabilities (Note (ii)) 5,987,224 (26,241) 5,960,983 NAV attributable to unitholders (Note (ii)) 26,351-26,351 6,135,081 (36,129) 6,098,952 19
14. TAKAFUL CERTIFICATE LIABILITIES (CONT'D.) (b) Family takaful fund (Cont'd.) (ii) The movements of the family takaful certificate liabilities are as follows: NAV Claims Actuarial Attributable to Gross Retakaful Net Liabilities Liabilities Unitholders Liabilities Assets Liabilities RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 At 1 January 2016 121,506 5,987,224 26,351 6,135,081 (36,129) 6,098,952 Net earned contribution - - 5,149 5,149 (26,255) (21,106) Other revenue - - 654 654 654 Experience/benefit variation 4,315 - - 4,315 15,783 20,098 Claims intimated during the period 396,495 (396,495) - - (202) (202) Claims paid during the period (392,575) - (3,427) (396,002) 10,472 (385,530) Other expenses - - (169) (169) - (169) Taxation - - (45) (45) - (45) Increase in certificate reserves - 549,917-549,917 (7,891) 542,026 At 30 June 2016 129,741 6,140,646 28,513 6,298,900 (44,222) 6,254,678 At 1 January 2015 83,802 5,788,823 22,296 5,894,921 (14,798) 5,880,123 Net earned contribution - - 6,712 6,712 (34,888) (28,176) Other revenue - - 1,476 1,476-1,476 Experience/benefit variation 131 - - 131 1,860 1,991 Claims intimated during the year 713,630 (713,630) - - (4,857) (4,857) Claims paid during the year (676,057) - (3,747) (679,804) 33,028 (646,776) Other expenses - - (285) (285) - (285) Taxation - - (101) (101) - (101) Increase in certificate reserves - 912,031-912,031 (16,474) 895,557 At 31 December 2015 121,506 5,987,224 26,351 6,135,081 (36,129) 6,098,952 20
15. OPERATING LEASE COMMITMENTS As at the reporting date, the Company and takaful funds lease office premises under lease agreements that are not cancellable within a year. The leases contain renewable options. Future minimum lease payments for leases with initial or remaining terms of one year or more are as follows: RM'000 RM'000 Within 1 year 10,892 11,115 After 1 year but not more than 5 years 39,616 38,791 50,508 49,906 16. REGULATORY CAPITAL REQUIREMENT The capital structure of the Company as at 30 June 2016, as prescribed under the RBCT Framework, is provided below: Company 30.6.2016 RM'000 RM'000 Eligible Tier 1 Capital Paid up share capital 400,000 400,000 Valuation surplus in takaful funds 2,855,920 2,633,951 Retained earnings 1,210,368 1,162,281 4,466,288 4,196,232 Tier 2 Capital Available-for-sale reserves 8,270 (36,047) Subordinated obligation 300,000 300,000 308,270 263,953 Amount deducted from capital (48,274) (68,938) Total Capital Available 4,726,284 4,391,247 21
17. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (a) Fair value hierarchy The company classify its financial instruments measured at fair value according to the Fair Value hierarchy. The levels of the Fair Value hierarchy as defined by the accounting standards are an indication of the observability of prices or valuation input. It can be classified into the following hierarchies/levels: Level 1 : Active Market quoted price Refers to financial instruments which are regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. Such financial instruments include actively traded government securities, listed derivatives and cash products traded on an exchange. Level 2 : No Active Market Valuation techniques using observable input Refers to inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices). Examples of level 2 financial instruments include corporate and other government bonds, less liquid equities and highly structured OTC derivatives. Level 3 : No Active Market Valuation techniques using unobservable input Refers to financial instruments where fair values are measured using unobservable market inputs. The valuation technique is consistent with level 2. The chosen valuation technique incorporates management's assumptions and data. Examples of level 3 instruments include corporate bonds in illiquid markets, private equity investments and investment properties. 22
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (a) Fair value hierarchy Shareholder's Fund Valuation techniques using: Level 1 Level 2 Quoted market Observable prices inputs Total RM'000 RM'000 RM'000 Assets AFS financial investments Malaysian government papers - 107,761 107,761 Unquoted debt securities in Malaysia - 1,802,275 1,802,275 Quoted equity securities in Malaysia 58,406-58,406 Quoted unit and property trust funds in Malaysia 4,040-4,040 Investment-linked units 22,658-22,658 Total assets 85,104 1,910,036 1,995,140 Liability Subordinated obligation - 302,202 302,202 Total liability - 302,202 302,202 Assets AFS financial investments Malaysian government papers - 117,241 117,241 Unquoted debt securities in Malaysia - 1,552,619 1,552,619 Quoted equity securities in Malaysia 108,538-108,538 Quoted unit and property trust funds in Malaysia 3,740-3,740 Investment-linked units 22,116-22,116 Total assets 134,394 1,669,860 1,804,254 Liability Subordinated obligation - 299,604 299,604 Total liability - 299,604 299,604 23
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (a) Fair value hierarchy (cont'd.) General takaful fund Valuation techniques using: Level 1 Level 3 Quoted Level 2 Non market Observable Observable prices inputs inputs Total RM'000 RM'000 RM'000 RM'000 Assets AFS financial investments Malaysian government papers - 378,424-378,424 Unquoted debt securities in Malaysia - 861,722 4,218 865,940 Quoted equity securities in Malaysia 9,109 - - 9,109 Quoted unit and property trust funds in Malaysia 308 - - 308 Total assets 9,417 1,240,146 4,218 1,253,781 Assets AFS financial investments Malaysian government papers - 518,895-518,895 Unquoted debt securities in Malaysia - 925,935 4,323 930,258 Quoted equity securities in Malaysia 17,921 - - 17,921 Quoted unit and property trust funds in Malaysia 331 - - 331 Structured products - 19,128-19,128 NICD - 9,848-9,848 Total assets 18,252 1,473,806 4,323 1,496,381 24
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (a) Fair value hierarchy (cont'd.) Family takaful fund Valuation techniques using: Level 1 Level 2 Level 3 Quoted Non market Observable Observable prices inputs inputs Total RM'000 RM'000 RM'000 RM'000 Assets AFS financial investments Malaysian government papers - 116,154-116,154 Unquoted debt securities in Malaysia - 1,827,915 31,281 1,859,196 Quoted equity securities in Malaysia 623,813 - - 623,813 Quoted unit and property trust funds in Malaysia 41,677 - - 41,677 NICD - 18,699-18,699 Financial investments at FVTPL - - Designated upon initial recognition Malaysian government papers - 226,503-226,503 Unquoted debt securities in Malaysia - 5,243,288 18,598 5,261,886 Structured products - 25,223-25,223 NICD - 102,827-102,827 - HFT Malaysian government papers - 4,463-4,463 Unquoted debt securities in Malaysia - 11,059-11,059 Quoted equity securities in Malaysia 8,493-8,493 Quoted unit and property trust funds outside Malaysia - 142-142 665,490 7,584,766 49,879 8,300,135 25
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (a) Fair value hierarchy (cont'd.) Family takaful fund Valuation techniques using: Level 1 Level 2 Level 3 Quoted Non market Observable Observable Total prices inputs inputs RM'000 RM'000 RM'000 RM'000 Assets AFS financial investments Malaysian government papers - 155,779-155,779 Unquoted debt securities in Malaysia - 1,615,801 32,064 1,647,865 Quoted equity securities in Malaysia 1,132,572 - - 1,132,572 Quoted unit and property trust funds in Malaysia 61,278 - - 61,278 NICD - 18,244-18,244 Financial investments at FVTPL - - Designated upon initial recognition Malaysian government papers - 244,701-244,701 Unquoted debt securities in Malaysia - 4,187,829 19,063 4,206,892 Structured products - 48,311-48,311 NICD - 110,175-110,175 - HFT Malaysian government papers - 4,192-4,192 Unquoted debt securities in Malaysia - 10,417-10,417 Quoted equity securities in Malaysia 8,374 - - 8,374 Quoted unit and property trust funds outside Malaysia 74 - - 74 1,202,298 6,395,449 51,127 7,648,874 26
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (b) Transfer between Level 1 and Level 2 in the fair value hierarchy Assets and liabilities of the Company are recognised in the financial statements on a recurring basis. The Company determine whether transfers have occurred between fair value hierarchy levels by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between Level 1 and Level 2 for the Company during the financial period ended 30 June 2016. (c) Reconciliation of level 3 fair value hierarchy General Takaful Fund Financial instruments measured at fair value Family Takaful Fund Financial instruments measured at fair value Designated AFS AFS at FVTPL RM'000 RM'000 RM'000 As at 1 January 2016 4,323 32,064 19,063 Recognised in income statement: Realised gain 12 90 54 Fair value gain/(loss) - - (182) Recognised in other comprehensive income as fair value loss: (41) (307) - Disposals (76) (566) (337) As at 30 June 2016 4,218 31,281 18,598 Total gains or losses recognised in income statement for financial instruments measured at fair value at the end of the 12 90 (128) reporting period Total gains or losses recognised in other comprehensive income for financial instruments measured at fair value at the end of the reporting period (41) (307) - 27
17. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (CONT'D.) (c) Reconciliation of level 3 fair value hierarchy (cont'd) General Takaful Fund Financial instruments measured at fair value Family Takaful Fund Financial instruments measured at fair value Designated AFS AFS at FVTPL RM'000 RM'000 RM'000 As at 1 January 2015 - - - Recognised in income statement: Realised loss (13) (94) (56) Fair value gain/(loss) - - 590 Recognised in other comprehensive income as fair value gain: 134 993 - Disposals (65) (480) (286) Transfer into Level 3 from Level 2 4,267 31,645 18,815 As at 31 December 2015 4,323 32,064 19,063 Total gains or losses recognised in income statement for financial instruments measured at fair value at the end of the (13) (94) 534 reporting period Total gains or losses recognised in other comprehensive income for financial instruments measured at fair value at the end of the reporting period 134 993 - During the financial year 31 December 2015, the Company transferred certain financial investments from Level 2 into Level 3 of the fair value hierarchy as these assets were valued using valuation models incorporating significant unobservable inputs. 28